11-Townhouse Ground Up New Construction - deal found on Bigger Pockets

[Vahe Ohannessian]

Investment Info:

Large multi-family (5+ units) other investment.

Purchase price: $600,000
Sale price: $4,200,000

Purchased land with existing 3 rented townhouses (separate building) and approvals for 11 more units. Purchased for $600,000, using 50% seller carry-back and 50% private money from two individuals. Converted 3 rental townhouses to condos and sold them first, paying off the debt, leaving remaining land free and clear with approvals to build. Obtained construction financing to build 11 units. Presold all units using on-site open houses during construction using Virtual Reality.

What made you interested in investing in this type of deal?

I'm an architect and builder and this is what I absolutely love - designing and building new projects, and in this case, acting as my own client!

How did you find this deal and how did you negotiate it?

I found the deal on a Bigger Pockets post by a wholesaler who had already negotiated a price with the owner, but was not able to get what he was asking for. We simply wrote an agreement that I would pay him an agreeable fee for bringing me the deal, in exchange for connecting me directly with the sellers. I met with the sellers and negotiated a lower price that worked for them, including the sellers financing 50% of the purchase price. I paid the Bigger Pockets wholesaler later as agreed.

How did you finance this deal?

This property and the strategy was very unique. The sellers were an older couple who did not want to complete the 14-unit project. They had built a 3-unit building but couldn't sell in 2008-2009, so they rented. I purchased it a decade later with land and approvals for 11 more units as a 2nd building. Sellers held 50% of purchase price, and 50% came from two private lenders. I converted and sold the units as condos, paid off the debt. The free and clear land allowed me to get construction loan.

How did you add value to the deal?

The creative financing was a major value-add. And since I'm a licensed architect and contractor, I was able to streamline a lot of the moving parts to the project and maintain control. I'm also a licensed RE agent but I decided to hire a broker friend who was the #1 agent in Attleboro and North Attleboro for many years, and she did a great job! We put our ideas together and collaborated on a couple of open houses during construction using Virtual Reality which we do in my design practice.

What was the outcome?

Overall I would say this was a moderately successful project. The COVID shutdown was a major factor in slowing us down, including financing for construction. We ended up buying construction materials at the worst time of inflation, but we also sold the units pretty close to the peak of the market.

Lessons learned? Challenges?

If your deal is not a straightforward transaction, especially if there's "phased" construction or anything that's out of the norm, GET AN ATTORNEY WITH EXPERIENCE IN THAT SPECIFIC UNIQUE SITUATION! In my case my first attorney had done multi-unit residential projects but not a "Phased" development. So at one point after selling the 3 units, I did not own anything legally! It took 6 months to clean up the legal docs with unit owners, their lenders, and my new attorney so I could build on my land!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Attorney Michael Larosa is amazing! mlarosalaw.com
Lori Seavey Realty Team: LoriSeavey.com